NEW YORK, Aug 17: The dollar slid lower against the euro on Friday, pressured by persistent concerns about the prospects for America’s economic recovery, but signs that consumer sentiment had stabilized helped temper its losses.

Burned by weaker-than-expected US manufacturing data a day earlier, traders sold the dollar lower in early New York trade ahead of a closely watched US consumer sentiment survey for the first half of August.

But when the University of Michigan’s consumer sentiment index came in better than market players had speculated, the dollar erased most of its losses against the euro and move into positive territory against the yen.

At the close of New York trade, the euro stood at 98.47 cents, up 0.34 per cent from the prior day’s US close but off the day’s high near 98.70 cents.

The dollar also fell as low as 117.12 yen before recovering to 117.66 yen, a 0.26 per cent gain on the day.

The University of Michigan’s preliminary August reading of sentiment slipped to 87.9 from 88.1 in July. Although the reading was below economists forecasts for a slight rise, it was well above figures batted around the market.

Rumours were that you were going have a much weaker consumer sentiment number, something like 74, which led to the euro rising ahead of the release, said Rebecca Patterson, currency strategist at J.P. Morgan Chase in New York.

But the dollar rallied on investors relief that the sentiment indicator was roughly in line with expectations.

The dollar also garnered some support after Japan’s top financial diplomat Haruhiko Kuroda said the yen’s recent rise against it was unfavorable and did not match economic fundamentals.

The University of Michigan index’s modest fall calmed market concerns about the possibility of a big decline in the consumer sector, which drives about two-thirds of the economy.

This is a hopeful sign that the economy may hang in and maintain moderate growth in the second half of the year rather than collapsing into a double-dip recession, said Stephen Stanley, senior economist at Greenwich Capital Markets.

On Thursday, the dollar had tumbled across the board after two US reports showed the recovery in US manufacturing sector was flagging.

The Philadelphia Federal Reserve’s business outlook index was much lower than expected, while a modestly positive US industrial production number nevertheless raised red flags because the gains were concentrated in the auto sector, where zero-percent interest financing incentives have boosted sales.

Traders were also looking ahead to next week’s US trade data, which economists forecast would show the country’s massive deficit narrowing a touch in June to $37.29 billion from May’s record $37.64 billion gap.

A rise in the trade gap could prompt traders to sell off the dollar, analysts said.

The deficit means Americans are sending more money abroad to purchase imports than they get in return, which naturally weighs on the dollar unless the United States can attract enough capital inflows to offset the outflows.—Reuters